Tenants broke lease early and finding replacement tenants

Steve Tom · 2023-09-22T12:35:04-07:00

Hello everyone.I have a question which need some helps. My current tenants are termianting the lease early. They have renewed an one year term little over three months ago, but have bought a house in late August.In the contract, it was stated that if the lease is terminated early, tenants must either assist in finding a replacement tenant to take over the lease, or will be charged in an amount equals to one month of lease as penalty.It has been almost a month since they have submitted their intention to terminate the lease, but we still could not find a tenant to take over the lease. I have listed the property on Zillow, and they have helped by posting on NextDoor and asking their coworkers.Now, there is one possible prospect tenant who can take over the lease, but he won't be moving in until end of November. Therefore, he won't be paying the rent for October, and most of November.The argument between me and the current tenants is that if I have agreed to sign on that new tenent, since he won't be able ot move in right away, this doesn't count as continuation of the lease. This is because the house will sits empty for over a month, and I won't be able to collecting any rental income. They argued that since that new tenant signs the lease, it doesn't matters when he moves in as the lease, in theory, would continues.Who is right on this?

Charles Carillo

Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes

3y

@Steve Tom

I have never had a lease provision that stated when a tenant terminates the lease early there is a fee or they can assist with finding a new tenant. It usually is just a straight fee of 1-2 months of rent, and that is it. This is now a tough position since they assisted with finding a replacement tenant but, they are not moving right in. I am not sure what else you can do in this situation. I would change the lease for future tenants to have a straight fee of 1-2 months of rent to make this much clearer and straightforward. Is there any work you can do to the unit to command a higher rent? Maybe let them vacate, do some repairs, and updates, and put it back on the market for a higher price.

2 Reply

Julie Hartman

Property Manager · Denver, CO · Member since 2021 · 667 posts · 587 votes

3y

I think much of this depends upon the language in your lease. Does it indicate a new tenant would need to take over the current TERM? If so, the current term would have already ended and they have no leg to stand on. Hopefully you have it spelled out in microscopic detail in your lease. Though, why would you ask a tenant to find a replacement? That takes some of the control out of your hands. I would eliminate that option and simply charge a break lease fee instead. This way there is no question what the penaly is and there is no room for interpretation. Good luck.

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Steve Tom

OP

Round Rock, TX · Member since 2019 · 31 posts · 7 votes

3y

Thx Julie, Charles.

I copied the term off the lease based on recommendation from the realtor who has helped leased out my property before I started doing it myself.

It does states that the new tenants must take over the lease so the 'current' lease of the property would be continuous without a break. I guess absed on that since the lease term does breaks, as there is a month of gap, then the current tenants will have to pay the penalty.

I will be sure to change that in the future.

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Julie Hartman

Property Manager · Denver, CO · Member since 2021 · 667 posts · 587 votes

3y

No offense but I think you need a more professional lease than a cut and paste document. Tenants have more power now than they ever have and it's growing by the day. I would either get the BP lease for TX OR pay a landlord/RE attorney to write one up for you. You need to protect yourself from confusion like this in the future. Best of luck to you.

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Richard F.

Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes

3y

Aloha,

This is no different than if they had NOT found a potential Tenant, and it took you until late November to find someone new. Outgoing Tenant is responsible for their initial term, or until a new Tenant starts paying rent. You do have to make a "good faith" effort to re-rent. The penalty fee is probably a separate issue, but would really depend on what local law allows, and the precise wording of your Rental Agreement. It could well be, if it is poorly written, that your total penalty would be limited to the one month, regardless of how long the vacancy actually runs. Only a local Attorney can answer that on review of the document.

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Theresa HarrisPro Member

Member since 2019 · 15k+ posts · 11k+ votes

3y

It should be until the new tenant moves in, not signs the lease. They also knew they'd be breaking the lease early and having to pay. There is no way they were not actively looking for a house at the time they renewed the lease. If this new person doesn't sign, you would still have it vacant...and they'd be responsible for rent.

1 Reply

Nathan GesnerBusiness Member

Moderator

Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

3y

I think you need to work on a better policy.

My policy is that the departing tenant must:

1. Give notice at least 30 days prior to departure, or at least remain responsible for rent for a full 30 days;

2. Pay an early termination fee equal to one month of rent on they day they give notice;

3. Work with me to market and show the rental to prospective renters.

This enables them to make a clean break, even if I haven't found a replacement tenant. It gives me 60 days (30 days with departing tenant still in plus 30 days termination fee) to find a new tenant before I start to lose money. I typically find a new tenant to start right after the old tenant departs, resulting in more money in my pocket.

You also shouldn't allow new renters to lock in your property so far in advance. What happens if October 25th comes along and they tell you they changed their mind? I hold properties for no more than 15 days, and I only do that with a deposit in hand. If the renter changes their mind, I keep the deposit.

If your departing tenant pays an early termination fee, that's you agreement that you are releasing them. If they don't pay a fee, then they should remain on the hook for the terms of the lease until a new tenant is placed. However, it's unfair for you to accept a tenant two months from now and force your departing tenants to pay rent for two additional months.

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Anthony Freeman

Member since 2023 · 327 posts · 63 votes

3y

Quote from @Charles Carillo:

@Steve Tom

I have never had a lease provision that stated when a tenant terminates the lease early there is a fee or they can assist with finding a new tenant. It usually is just a straight fee of 1-2 months of rent, and that is it. This is now a tough position since they assisted with finding a replacement tenant but, they are not moving right in. I am not sure what else you can do in this situation. I would change the lease for future tenants to have a straight fee of 1-2 months of rent to make this much clearer and straightforward. Is there any work you can do to the unit to command a higher rent? Maybe let them vacate, do some repairs, and updates, and put it back on the market for a higher price.

I agree that the language should have been more concise before this occurred.

0 Reply

Steve Tom

OP

Round Rock, TX · Member since 2019 · 31 posts · 7 votes

3y

Quote from @Nathan Gesner:

I think you need to work on a better policy.

My policy is that the departing tenant must:

1. Give notice at least 30 days prior to departure, or at least remain responsible for rent for a full 30 days;

2. Pay an early termination fee equal to one month of rent on they day they give notice;

3. Work with me to market and show the rental to prospective renters.

This enables them to make a clean break, even if I haven't found a replacement tenant. It gives me 60 days (30 days with departing tenant still in plus 30 days termination fee) to find a new tenant before I start to lose money. I typically find a new tenant to start right after the old tenant departs, resulting in more money in my pocket.

You also shouldn't allow new renters to lock in your property so far in advance. What happens if October 25th comes along and they tell you they changed their mind? I hold properties for no more than 15 days, and I only do that with a deposit in hand. If the renter changes their mind, I keep the deposit.

If your departing tenant pays an early termination fee, that's you agreement that you are releasing them. If they don't pay a fee, then they should remain on the hook for the terms of the lease until a new tenant is placed. However, it's unfair for you to accept a tenant two months from now and force your departing tenants to pay rent for two additional months.

Probably misunderstood. I did not asked the outing tenants to pay two months of lease. It is just one month of the lease, as stated in the contract. It was just that they are trying to not to pay it.

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Nathan GesnerBusiness Member

Moderator

Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

3y

Quote from @Steve Tom:

I understood. There are two problems:

1. Departing tenants are not paying the early termination fee;

2. You are considering holding the property for 2+ months for a future renter.

These are both mistakes. Don't accept notice of early termination unless the fee comes with it. Don't hold a property for a new renter for more than 15 days and with a security deposit paid in full.

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Tenants broke lease early and finding replacement tenants

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